Royalty Pharma plc

RPRX

GB00BMVP7Y09

Pharmaceuticals

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Apr. 17	Royalty Pharma Maintains Quarterly Dividend at $0.21 per Share, Payable June 14 to Shareholders of Record May 17	MT
Apr. 17	Royalty Pharma plc Declares Dividend for the Second Quarter of 2024, Payable on June 14, 2024	CI

ROYALTY PHARMA PLC MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

May 05, 2022 at 09:06 am EDT

The following Management's Discussion and Analysis of Financial Condition and
Results of Operations ("MD&A") is intended to help the reader understand our
results of operations and financial condition, cash flows and other changes in
financial condition. MD&A is provided as a supplement to, and should be read in
conjunction with, our audited consolidated financial statements and the
accompanying notes to our consolidated financial statements included in our
Annual Report on Form 10-K. This discussion may contain forward-looking
statements based upon current expectations that involve risks and uncertainties.
Our actual results may differ materially from those anticipated in these
forward-looking statements as a result of various factors, including those set
forth in Special Note Regarding Forward-Looking Statements included elsewhere in
this Quarterly Report on Form 10-Q and in Part I, Item 1A. Risk Factors in our
Annual Report on Form 10-K.

Royalty Pharma plc is an English public limited company incorporated under the
laws of England and Wales that was created for the purpose of consolidating our
predecessor entities and facilitating the initial public offering ("IPO") of our
Class A ordinary shares that was completed in June 2020. "Royalty Pharma," the
"Company," "we," "us" and "our" refer to Royalty Pharma plc and its subsidiaries
on a consolidated basis.

Business Overview

We are the largest buyer of biopharmaceutical royalties and a leading funder of
innovation across the biopharmaceutical industry. Since our founding in 1996, we
have been pioneers in the royalty market, collaborating with innovators from
academic institutions, research hospitals and not-for-profits through small and
mid-cap biotechnology companies to leading global pharmaceutical companies. We
have assembled a portfolio of royalties which entitles us to payments based
directly on the top-line sales of many of the industry's leading therapies,
which includes royalties on more than 35 commercial products, including AbbVie
and Johnson & Johnson's Imbruvica, Astellas and Pfizer's Xtandi, Biogen's
Tysabri, Johnson & Johnson's Tremfya, Gilead's Trodelvy, Merck & Co.'s Januvia,
Novartis' Promacta, Vertex's Kalydeco, Orkambi, Symdeko and Trikafta, and ten
development-stage product candidates. We fund innovation in the
biopharmaceutical industry both directly and indirectly - directly when we
partner with companies to co-fund late-stage clinical trials and new product
launches in exchange for future royalties, and indirectly when we acquire
existing royalties from the original innovators.

Our capital-efficient business model enables us to benefit from many of the most
attractive characteristics of the biopharmaceutical industry, including long
product life cycles, significant barriers to entry and noncyclical revenues, but
with substantially reduced exposure to many common industry challenges such as
early stage development risk, therapeutic area constraints, high research and
development costs, and high fixed manufacturing and marketing costs. We have a
highly flexible approach that is agnostic to both therapeutic area and treatment
modality, allowing us to acquire royalties on the most attractive therapies
across the biopharmaceutical industry.

We classify our royalty acquisitions by the approval status of the therapy at the time of acquisition:



•Approved Products - We acquire royalties in approved products that generate
predictable cash flows and may offer upside potential from unapproved
indications. Since inception in 1996 through 2021, we have deployed $15.0
billion of cash to acquire royalties on approved products. From 2012 through
2021, we have acquired $10.2 billion of royalties on approved products.

•Development-Stage Product Candidates - We acquire royalties on development-stage product candidates that have demonstrated strong clinical proof of concept. From 2012, when we began acquiring royalties on development-stage product candidates, through 2021, we have deployed $7.8 billion to acquire royalties on development-stage product candidates.



While we classify our acquisitions in these two broad categories, several of our
acquisitions of royalties on approved products were driven by the long-term
potential of these products in other, unapproved indications. Similarly, some of
our royalty acquisitions in development-stage product candidates are for
products that are approved in other indications.

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                               ROYALTY PHARMA PLC
            NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)

We acquire product royalties in a variety of ways that can be tailored to the
needs of our partners. We classify our product royalty acquisitions according to
the following structures:

•Third-party Royalties - A royalty is the contractual right to a percentage of
top-line sales from a licensee's use of a product, technology or intellectual
property. The majority of our current portfolio consists of third-party
royalties.

•Synthetic/Hybrid Royalties - A synthetic royalty is the contractual right to a
percentage of top-line sales created by the developer and/or marketer of a
therapy in exchange for funding. A synthetic royalty may also include contingent
milestone payments, or be structured as a long-term stream of fixed payments
with a predetermined schedule. In many of our synthetic royalties, we may also
make investments in the public equity of the company, where the main value
driver of the company is the product on which we concurrently acquired a
royalty.

•Development-stage Funding - We have historically funded ongoing research and
development ("R&D"), typically for large biopharmaceutical companies, in
exchange for future royalties and/or milestones if the product or indication we
are funding is approved. We have also made upfront development-stage funding
payments to biotechnology companies to acquire royalties and/or milestones on
development-stage product candidates.

•Mergers and Acquisitions ("M&A") - We acquire royalties in connection with M&A
transactions, often from the buyers of biopharmaceutical companies when they
dispose of the non-strategic assets of the target company following the closing
of the acquisition. We also seek to partner with companies to acquire other
biopharmaceutical companies that own significant royalties. We may also seek to
acquire biopharmaceutical companies that have significant royalties or where we
can create royalties in subsequent transactions.

Background and Format of Presentation



In connection with our IPO, we consummated an exchange offer on February 11,
2020. Through the exchange offer, investors representing 82% of the aggregate
limited partnership in the various partnerships (the "Legacy Investors
Partnerships") that own Royalty Pharma Investments, an Irish unit trust ("Old
RPI"), exchanged their limited partnership interests in the Legacy Investors
Partnerships for limited partnership interests in RPI US Partners 2019, LP, a
Delaware limited partnership or RPI International Holdings 2019, LP, a Cayman
Islands exempted limited partnership (together, the "Continuing Investors
Partnerships"). The exchange offer transaction together with (i) the concurrent
incurrence of indebtedness under senior credit facilities and (ii) the issuance
of additional interests in Continuing Investors Partnerships to satisfy
performance payments payable in respect of assets acquired prior to the date of
the IPO are referred to as the "Exchange Offer Transactions".

Following our IPO, we operate and control the business affairs of Royalty Pharma
Holdings Ltd, ("RP Holdings") through our controlling ownership of RP Holdings'
Class A ordinary shares (the "RP Holdings Class A Interests") and RP Holdings'
Class B ordinary shares (the "RP Holdings Class B Interests"). RP Holdings is
the sole owner of RPI 2019 ICAV, which is an Irish collective asset management
entity formed to facilitate our Exchange Offer Transactions.

As a result of the Exchange Offer Transactions, we own, through our subsidiary
RPI 2019 Intermediate Finance Trust, a Delaware statutory trust ("RPI
Intermediate FT"), an 82% economic interest in Old RPI. Through our 82% indirect
ownership of Old RPI, we are legally entitled to 82% of the economics of Old
RPI's wholly-owned subsidiaries, RPI Finance Trust, a Delaware statutory trust
("RPIFT") and RPI Acquisitions (Ireland), Limited ("RPI Acquisitions"), an Irish
private limited company, and 66% of Royalty Pharma Collection Trust, a Delaware
statutory trust ("RPCT").

The remaining 34% of RPCT is owned by the Legacy Investors Partnerships and Royalty Pharma Select Finance Trust, a Delaware statutory trust ("RPSFT"), which is wholly owned by Royalty Pharma Select, an Irish unit trust.

Understanding Our Financial Reporting



Most of the royalties we acquire are treated as investments in cash flow streams
and are classified as financial assets measured under the effective interest
method in accordance with generally accepted accounting principles in the United
States ("GAAP"). Under this accounting methodology, we calculate the effective
interest rate on each financial royalty asset using a forecast of the expected
cash flows to be received over the life of the financial royalty asset relative
to the initial acquisition price. The yield, which is calculated at the end of
each reporting period and applied prospectively, is then recognized via
accretion into our income at the effective rate of return over the expected life
of the financial royalty asset.

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                               ROYALTY PHARMA PLC
            NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)

The measurement of income from our financial royalty assets requires significant
judgments and estimates, including management's judgment in forecasting the
expected future cash flows of the underlying royalties and the expected duration
of the financial royalty asset. Our cash flow forecasts are generated and
updated each reporting period by manually compiling sell-side equity research
analysts' consensus sales estimates for each of the products in which we own
royalties. We then calculate our expected royalty cash flows using these
consensus sales forecasts. In any given reporting period, any decline or
increase in the expected future cash flows associated with a financial royalty
asset is recognized in our income statement as non-cash provision expense or
provision income, respectively.

As a result of the non-cash charges associated with applying the effective
interest method accounting methodology, our income statement activity can be
volatile and unpredictable. Small declines in sell-side equity research
analysts' consensus sales forecasts over a long term horizon can result in an
immediate non-cash income statement expense recognition which generates a
corresponding cumulative allowance that reduces the gross asset balance, even
though the applicable cash inflows will not be realized for many years into the
future. For example, in late 2014 we acquired the cystic fibrosis franchise
royalty and beginning in the second quarter of 2015, declines in near-term sales
forecasts of sell-side equity research analysts caused us to recognize non-cash
provision expense. Over the course of 10 quarters, we recognized non-cash
provision expense as a result of these changes in forecasts including non-cash
provision expense of $743.2 million in 2016, ultimately reaching a peak
cumulative allowance of $1.30 billion by September 30, 2017 related to this
financial royalty asset. With the approval of the Vertex triple combination
therapy, Trikafta, in October 2019, sell-side equity research analysts'
consensus sales forecasts increased to reflect the larger addressable market and
the extension of the expected duration of the Trikafta royalty. While small
reductions in the cumulative allowance for the cystic fibrosis franchise were
recognized as provision income over the course of 2017 and 2018, there remained
a $1.10 billion cumulative allowance that was fully reduced by recognizing
provision income of $1.10 billion in 2019 as a result of an increase in
sell-side equity research analysts' consensus sales forecasts associated with
the Trikafta approval. This example illustrates the volatility caused by our
accounting model.

In addition, due to the nature of our effective interest methodology, there is
no direct correlation between our income from financial royalty assets and our
royalty receipts. Therefore, management believes investors should not look to
income from royalties and the associated provision for changes in future cash
flows as a measure of our near-term financial performance or as a source for
predicting future income or growth trends. Our operations have historically been
financed primarily with cash flows generated by our royalties. Given the
importance of cash flows and their predictability to management's operation of
the business, management uses royalty receipts as the primary measure of our
operating performance. Royalty receipts refer to the summation of the following
line items from our GAAP consolidated statements of cash flows: Cash collections
from financial royalty assets, Cash collections from intangible royalty assets,
Other royalty cash collections, Proceeds from available for sale debt
securities, and Distributions from equity method investees.

In addition to analyzing our results on a GAAP basis, management also reviews
our results on a non-GAAP basis. The closest comparable GAAP measure to each of
the non-GAAP measures that management review is Net cash provided by operating
activities. The key non-GAAP metrics we focus on are Adjusted Cash Receipts,
Adjusted EBITDA and Adjusted Cash Flow, each of which is further discussed in
the section titled "Non-GAAP Financial Results".

Adjusted Cash Receipts and Adjusted Cash Flow are used by management as key
liquidity measures in the evaluation of our ability to generate cash from
operations. Both measures are an indication of the strength of the Company and
the performance of the business. Management uses Adjusted Cash Flow to compare
its performance against non-GAAP adjusted net income used by companies in the
biopharmaceutical industry. Adjusted EBITDA, which is derived from Adjusted Cash
Receipts, is used by our lenders to assess our ability to meet our financial
covenants.

Refer to the section titled "Non-GAAP Reconciliations" for additional discussion of management's use of non-GAAP measures as supplemental financial measures.


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                               ROYALTY PHARMA PLC
            NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)


Portfolio Overview

Our portfolio consists of royalties on more than 35 marketed therapies and ten
development-stage product candidates. The therapies in our portfolio address
therapeutic areas such as rare disease, cancer, neurology, infectious disease,
hematology and diabetes, and are delivered to patients across both primary and
specialty care settings. The table below includes royalty receipts for the three
months ended March 31, 2022 and 2021 in order of contributions to royalty
receipts for the three months ended March 31, 2022 (in thousands).
                                                                                                                        For the Three
                                                                                                                     Months Ended March
                                                                                                                             31,
            Royalties                              Marketer(s)                      Therapeutic Area                           2022                2021

Cystic fibrosis franchise (1)           Vertex                                   Rare disease                              $  201,882          $  166,809
Tysabri                                 Biogen                                   Neurology                                     97,439              86,921
Imbruvica                               AbbVie, Johnson & Johnson                Cancer                                        87,171              89,135
Promacta                                Novartis                                 Hematology                                    47,897              44,126
Xtandi                                  Pfizer, Astellas                         Cancer                                        43,395              41,045
Januvia, Janumet, Other DPP-IVs
(2)                                     Merck & Co., others                      Diabetes                                      35,682              35,761

Tremfya                                 Johnson & Johnson                        Immunology                                    28,224                   -
Nurtec ODT/Biohaven payment (3)         Biohaven, Pfizer                         Neurology                                     20,375              16,501
Cabometyx/Cometriq                      Exelixis, Ipsen, Takeda                  Cancer                                        12,857                   -
Farxiga/Onglyza                         AstraZeneca                              Diabetes                                       9,469               8,562
Evrysdi                                 Roche                                    Rare disease                                   9,197               1,677
Trodelvy                                Gilead                                   Cancer                                         4,892               2,605
Erleada                                 Johnson & Johnson                        Cancer                                         4,886               3,104
Emgality                                Lilly                                    Neurology                                      4,764               3,264
Crysvita                                Ultragenyx, Kyowa Kirin                  Rare disease                                   4,712               3,588
Orladeyo                                BioCryst                                 Rare disease                                   4,426                  12
Prevymis                                Merck & Co.                              Infectious disease                             4,126               8,630

Oxlumo                                  Alnylam                                  Rare disease                                     766                   -
Other products (4)                                                                                                             88,871             137,738
Total royalty receipts                                                                                                     $  711,031          $  649,478


(1)The cystic fibrosis franchise includes the following approved products:
Kalydeco, Orkambi, Symdeko/Symkevi, and Trikafta/Kaftrio.
(2)Januvia, Janumet, Other DPP-IVs include the following approved products:
Onglyza, Kombiglyze, Galvus, Eucreas and Nesina. The Other DPP-IVs are marketed
by AstraZeneca, Novartis and Takeda.
(3)Includes royalty receipts for Nurtec ODT of $4.8 million and $0.9 million for
the three months ended March 31, 2022 and 2021, respectively, and quarterly
redemptions of $15.6 million in 2022 and 2021 of the Series A Biohaven Preferred
Shares (presented as Proceeds from available for sale debt securities on the
statements of cash flows).
(4)Other products primarily include royalty receipts on the following products:
Bosulif (a product co-developed by our joint venture investee, Avillion,I, for
which receipts are presented as Distributions from equity method investees on
the statements of cash flows), Cimzia, Entyvio, HIV franchise, IDHIFA, Letairis,
Lexiscan, Mircera, Myozyme, Nesina, Soliqua, Tazverik and contributions from the
Legacy SLP Interest (defined below).

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                               ROYALTY PHARMA PLC
            NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


                                  (UNAUDITED)

Financial Overview

Financial Highlights

•Net cash provided by operating activities totaled $460.3 million and $526.1
million for the three months ended March 31, 2022 and 2021, respectively. Net
cash provided by operating activities is the closest comparable GAAP financial
measure to the supplemental non-GAAP liquidity measures that follow.
•Adjusted Cash Receipts (a non-GAAP metric) totaled $604.6 million and
$523.8 million for the three months ended March 31, 2022 and 2021, respectively.
•Adjusted EBITDA (a non-GAAP metric) totaled $555.7 million and $481.6 million
for the three months ended March 31, 2022 and 2021, respectively.
•Adjusted Cash Flow (a non-GAAP metric) totaled $367.1 million and
$409.3 million for the three months ended March 31, 2022 and 2021, respectively.

Understanding Our Results of Operations

We report non-controlling interests related to the portion of ownership interests of consolidated subsidiaries not owned by us which are attributable to:



1.   The Legacy Investors Partnerships' 18% ownership interest in Old RPI. The
value of this non-controlling interest will decline over time as the assets in
Old RPI expire.

2.   The RP Holdings Class B Interests held indirectly by the Continuing
Investors Partnerships, which represent an approximate 28% ownership interest in
RP Holdings as of March 31, 2022 and are exchangeable for our Class A ordinary
shares. The value of this non-controlling interest will decline over time if the
investors who indirectly own the RP Holdings Class B Interests conduct exchanges
for our Class A ordinary shares.

3. A de minimis interest in RPCT held by RPSFT as a result of a 2011 reorganization transaction. The value of this non-controlling interest will decline over time as the royalty assets owned by RPCT expire and is expected to be substantially eliminated by the end of 2022.



4.   The RP Holdings Class C ordinary share (the "RP Holdings Class C Special
Interest") held by RPI EPA Holdings, LP ("EPA Holdings"), an affiliate of the
Manager. Income will not be allocated to this non-controlling interest until
certain conditions are met.

All of the results of operations of RP Holdings, Old RPI and RPCT are consolidated into our financial statements.



Following the IPO, EPA Holdings is entitled to receive Equity Performance Awards
through its RP Holdings Class C Special Interest. Equity Performance Awards owed
to EPA Holdings will be recognized as an equity transaction when the obligation
becomes due and will impact the income allocated to non-controlling interest
related to the RP Holdings Class C Special Interest at that time. The Equity
Performance Awards will be payable in RP Holdings Class B Interests for which we
will issue the same number of our Class B ordinary shares, which may be
subsequently exchanged for our Class A ordinary shares. We do not currently
expect any material Equity Performance Awards to be payable until certain
performance conditions are met, which we do not expect to occur until the
mid-2020s.

Total income and other revenues



Total income and other revenues is primarily comprised of income from our
financial royalty assets, royalty revenue from our intangible royalty assets,
and royalty income generally arising from successful commercialization of
products developed through joint R&D funding arrangements. Most of our royalties
on both approved products and development-stage product candidates that are not
accounted for as R&D funding expense are classified as financial assets as our
ownership rights are generally passive in nature. In instances in which we
acquire a royalty that does include more substantial rights or ownership of the
underlying intellectual property, we classify such royalties as intangible
assets.

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                               ROYALTY PHARMA PLC
            NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)

We recognize interest income related to our financial royalty assets. Royalty
revenue relates solely to revenue from our DPP-IV patent estate for which the
patent rights have been licensed to various counterparties. For the three months
ended March 31, 2022 and 2021, the royalty payors accounting for greater than
10% of our total income and other revenues in any one period are shown in the
table below:

                                                                              For the Three Months Ended
                                                                                       March 31,
      Royalty Payor                            Royalties                                        2022                  2021
Vertex                           Cystic fibrosis franchise                                           35  %                 32  %
AbbVie                           Imbruvica                                                           16  %                 17  %
                                 HIV franchise, Letairis, Lexiscan,
Gilead                           Trodelvy                                                                *                 12  %

* Represents less than 10%.

Income from financial royalty assets



Our financial royalty assets represent investments in cash flow streams with
yield components that most closely resemble loans measured at amortized cost
under the effective interest method. We calculate the effective interest rate
using forecasted expected cash flows to be received over the life of the royalty
asset relative to the initial acquisition price. Interest income is recognized
at the effective rate of return over the expected life of the asset, which is
calculated at the end of each reporting period and applied prospectively. As
changes in sell-side equity research analysts' consensus sales estimates are
updated on a quarterly basis, the effective rate of return changes. For example,
if sell-side equity research analysts' consensus sales forecasts increase, the
yield to derive income on a financial royalty asset will increase and result in
higher income for subsequent periods.

Variables affecting the recognition of interest income from financial royalty
assets on individual products under the prospective effective interest method
include any one of the following: (1) additional acquisitions, (2) changes in
expected cash flows of the underlying pharmaceutical products, derived primarily
from sell-side equity research analysts' consensus sales forecasts, (3)
regulatory approval of additional indications which leads to new cash flow
streams, (4) changes to the estimated duration of the royalty (i.e., patent
expiration date) and (5) changes in amounts and timing of projected royalty
receipts and milestone payments. Our financial royalty assets are directly
linked to sales of underlying pharmaceutical products whose life cycle typically
peaks at a point in time, followed frequently by declining sales trends due to
the entry of generic competition, resulting in natural declines in the asset
balance and periodic interest income over the life of our royalties. The
recognition of interest income from royalties requires management to make
estimates and assumptions around many factors, including those impacting the
variables noted above.

Revenue from intangible royalty assets



Revenue from intangible royalty assets is derived from sales of Januvia, Janumet
and other DPP-IV products by our licensees. Our royalties on Januvia and Janumet
expired in the three months ended March 31, 2022. Our royalties on other DPP-IVs
have also substantially ended and we do not expect any material revenue from our
DPP-IV intangible assets in the future periods.

Other royalty income



Other royalty income primarily includes income from financial royalty assets
that have been fully amortized by the expected expiry date and royalty income
from synthetic royalties arising out of R&D funding arrangements. Occasionally,
a royalty asset may be amortized on an accelerated basis due to collectability
concerns, which, if resolved, may result in future cash collections when no
financial royalty asset remains. Similarly, we may continue to collect royalties
on a financial royalty asset beyond the estimated duration by which the
financial asset was fully amortized. In each scenario where a financial royalty
asset has been fully amortized, income from such royalty is recognized as Other
royalty income.

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                               ROYALTY PHARMA PLC
            NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)

Provision for changes in expected cash flows from financial royalty assets

The Provision for changes in expected future cash flows from financial royalty assets includes the following:



•expense or income related to the current period activity resulting from
adjustments to the cumulative allowance for changes in expected cash flows; and
•expense or income related to the provision for current expected credit losses,
which reflects the activity for the period, primarily due to new financial
royalty assets with limited protective rights and changes to cash flow estimates
for financial royalty assets with limited protective rights.

As discussed above, income is accreted on our financial royalty assets using the
effective interest method. As we update our forecasted cash flows on a periodic
basis and recalculate the present value of the remaining future cash flows, any
shortfall when compared to the carrying value of the financial royalty asset is
recorded directly to the income statement through the line item Provision for
changes in expected cash flows from financial royalty assets. If, in a
subsequent period, there is an increase in expected cash flows or if actual cash
flows are greater than cash flows previously expected, we reduce the cumulative
allowance previously established for a financial royalty asset for the
incremental increase in the present value of cash flows expected to be
collected. This results in provision income (i.e., a credit to the provision).

Most of the same variables and management's estimates affecting the recognition
of interest income on our financial royalty assets also impact the provision. In
any period, we will recognize provision income or expense as a result of the
following factors: (1) changes in expected cash flows of the underlying
pharmaceutical products, derived primarily from sell-side equity research
analysts' consensus sales forecasts, (2) regulatory approval of additional
indications which leads to new cash flow streams, (3) changes to the estimated
duration of the royalty (i.e., patent expiration date) and (4) changes in
amounts and timing of projected royalty receipts and milestone payments.

R&D funding expense



R&D funding expense consists of upfront and ongoing development-stage funding
payments we have made to counterparties to acquire royalties and/or milestones
on development-stage product candidates. Upfront development-stage funding
expense includes payments made at the close of acquisitions and subsequent
milestone payments. Ongoing development-stage funding payments are made as the
related product candidates undergo clinical trials with our counterparties.
These expenditures relate to the activities performed by our counterparties to
develop and test new products, to test existing products for treatment in new
indications, and to ensure product efficacy and regulatory compliance prior to
launch.

General and administrative expenses



General and administrative ("G&A") expenses include primarily Operating and
Personnel Payments (defined below), legal expenses, other expenses for
professional services and share-based compensation. The expenses incurred in
respect of Operating and Personnel Payments are expected to comprise the most
significant component of G&A expenses on an ongoing basis.

Under the management agreement that became effective on February 11, 2020 (the
"Management Agreement"), we pay quarterly operating and personnel expenses to
the Manager or its affiliates ("Operating and Personnel Payments") equal to 6.5%
of the cash receipts from royalty investments for each quarter and 0.25% of the
value of our security investments under GAAP as of the end of each quarter.

The operating and personnel payments for Old RPI, an obligation of the Legacy
Investors Partnerships as a non-controlling interest in Old RPI and for which
the expense is reflected in G&A expenses, are calculated as the greater of $1
million per quarter and 0.3125% of royalties from Royalty Investments (as
defined in the limited partnership agreements of the Legacy Investors
Partnerships) during the previous twelve calendar months.

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                               ROYALTY PHARMA PLC
            NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)

Equity in (earnings)/losses of equity method investees

Equity in (earnings)/losses of equity method investees primarily includes the results of our share of income or loss from the following non-consolidated affiliates:



1. Legacy SLP Interest. In connection with the Exchange Offer Transactions, we
acquired an equity method investment from the Continuing Investors Partnerships
in the form of a special limited partnership interest in the Legacy Investors
Partnerships (the "Legacy SLP Interest") in exchange for issuing shares in our
subsidiary. The Legacy SLP Interest entitles us to the equivalent of performance
distribution payments that would have been paid to the general partner of the
Legacy Investors Partnerships and a performance income allocation on a similar
basis. As the Legacy Investors Partnerships no longer participate in investment
opportunities, the value of the Legacy SLP Interest is expected to decline over
time.

2. The Avillion Entities. The Avillion entities (as defined below) partner with
global biopharmaceutical companies to perform R&D in exchange for success-based
milestones and/or royalties once products are commercialized. Our investments in
Avillion Financing I, LP ("Avillion I") and BAv Financing II, LP ("Avillion II",
or, together with Avillion I, the "Avillion Entities") are accounted for using
the equity method.

Other expense, net

Other expense, net primarily includes the change in fair market value of our
equity securities and the unrealized gains and losses on our available for sale
debt securities, including related forwards and funding commitments, and
interest income.

Net income attributable to non-controlling interests



The net income attributable to non-controlling interests includes the Legacy
Investors Partnerships' approximately 18% share of earnings in Old RPI. As the
Legacy Investors Partnerships no longer participate in investment opportunities,
the related net income attributable to this non-controlling interest is expected
to decline over time.

Net income attributable to non-controlling interests includes the RP Holdings
Class B Interests held by the Continuing Investors Partnerships and will include
net income attributable to the RP Holdings Class C Special Interest held by EPA
Holdings once certain conditions have been met. Future net income attributable
to the non-controlling interest related to the RP Holdings Class B Interests
held by the Continuing Investors Partnerships will decline over time if the
investors who indirectly own the RP Holdings Class B Interests conduct exchanges
for our Class A ordinary shares.

Net income attributable to non-controlling interests also includes RPSFT's 20%
share of earnings in RPCT, which is a consolidated subsidiary of Old RPI. We
expect net income attributable to this non-controlling interest to decline over
time as the royalty assets owned by RPCT expire and to be substantially
eliminated by the end of 2022.

Net income attributable to non-controlling interests above can fluctuate significantly from period to period, primarily driven by volatility in the income statement activity of the respective underlying entity as a result of the non-cash charges associated with applying the effective interest accounting methodology as described in section titled "Understanding Our Financial Reporting".


                                       34
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                               ROYALTY PHARMA PLC
            NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)

Results of Operations

For the Three Months Ended March 31, 2022 and 2021

The comparison of our historical results of operations for the three months ended March 31, 2022 and 2021 is as follows:



(in thousands)                                                   For the Three Months Ended March 31,              2022 vs. 2021 Change
                                                                                                                  2022                2021                $                  %
Income and other revenues:
Income from financial royalty assets                                                                         $   511,523          $ 529,625          $ (18,102)              (3.4) %
Revenue from intangible royalty assets                                                                            33,586             36,061             (2,475)              (6.9) %
Other royalty income                                                                                              16,940              7,341              9,599              130.8  %
Total income and other revenues                                                                                  562,049            573,027            (10,978)              (1.9) %
Operating expenses:
Provision for changes in expected cash flows
from financial royalty assets                                                                                    184,621            292,262           (107,641)             (36.8) %
Research and development funding expense                                                                         100,500              2,641             97,859                     *
Amortization of intangible assets                                                                                  5,670              5,671                 (1)               0.0  %
General and administrative expenses                                                                               51,540             43,156              8,384               19.4  %

Total operating expenses, net                                                                                    342,331            343,730             (1,399)              (0.4) %
Operating income                                                                                                 219,718            229,297             (9,579)              (4.2) %
Other (income)/expense:
Equity in (earnings)/losses of equity method
investees                                                                                                           (397)             1,918             (2,315)            (120.7) %
Interest expense                                                                                                  47,063             37,415              9,648               25.8  %

Other expense, net                                                                                                44,969             30,985             13,984               45.1  %
Total other expenses, net                                                                                         91,635             70,318             21,317               30.3  %
Consolidated net income                                                                                          128,083            158,979            (30,896)             (19.4) %
Net income attributable to non-controlling
interests                                                                                                         76,322             89,860            (13,538)             (15.1) %
Net income attributable to Royalty Pharma plc                                                                $    51,761          $  69,119          $ (17,358)             (25.1) %

*Percentage change is not meaningful.

Total income and revenues

Income from financial royalty assets



Income from financial royalty assets by top products for the three months ended
March 31, 2022 and 2021 is as follows, in order of contribution to income for
the three months ended March 31, 2022:

(in thousands)                                      For the Three Months Ended March 31,               2022 vs. 2021 Change
                                                                                                     2022                2021                 $                   %
Cystic fibrosis franchise                                                                       $   194,457          $  184,816          $   9,641                  5.2  %
Imbruvica                                                                                            87,627              99,115            (11,488)               (11.6) %
Tysabri                                                                                              52,521              51,098              1,423                  2.8  %
Xtandi                                                                                               24,917              26,980             (2,063)                (7.6) %
Promacta                                                                                             20,804              16,284              4,520                 27.8  %
Evrysdi                                                                                              18,088              14,426              3,662                 25.4  %
Other                                                                                               113,109             136,906            (23,797)               (17.4) %
Total income from financial royalty
assets                                                                                          $   511,523          $  529,625          $ (18,102)                (3.4) %



                                       35


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                               ROYALTY PHARMA PLC
            NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)